Japanese shares closed higher, after swinging between gains and losses most of the day, as volume remained below the 30-day average and the yen traded above 95 to the U.S. dollar ahead of a Federal Reserve Policy meeting.
Shipping companies climbed the most among the Topix (TPX)’s 33 industry groups, while exporters provided the biggest support. Kansai Electric Power Co. (9503) led advances on the Nikkei 225 Stock Average after a report new safety guidelines for nuclear plants may be put into effect on July 8. Sony Corp. rose 4.4 percent as a fund run by activist shareholder Daniel Loeb said it increased its stake in the electronics maker while continuing to urge the company to change. Drugmakers provided the biggest drag among the Topix sector groups.
The Topix rose 0.2 percent to 1,086.40 at the close of trading in Tokyo, with volume about 45 percent below the 30-day intraday average. Almost as many shares rose as fell on the 1,709-member gauge. The measure advanced as much as 1 percent and retreated 0.5 percent. The Nikkei 225 slid 0.2 percent to 13,007.28. Futures traded in Singapore were little changed.
“The market has become very reactive to even small speculative reports,” said Akio Yoshino, chief economist in Tokyo at Amundi Japan Ltd., which oversees about 2.6 trillion yen ($27 billion). “Investors are going to be waiting on the sidelines until the Fed results. Japanese shares are cheap on a valuation and technical level, so once there’s a catalyst investors are going to be buying again.”
Attention will focus on Fed Chairman Ben S. Bernanke’s press conference tomorrow after the two-day policy meeting. About $2.5 trillion has been erased from global markets since he said on May 22 that the central bank could begin winding back stimulus if the U.S. job market shows sustainable improvement.
Futures on the Standard & Poor’s 500 Index were little changed today. The gauge rose 0.8 percent yesterday as investors weighed economic data with prospects for stimulus cuts. Data showed New York manufacturers were more optimistic, while U.S. homebuilder confidence surged to the highest in seven years.
U.S. shares pared gains after the Financial Times reported that Bernanke may signal the central bank is close to tapering its $85 billion in asset purchases.
“We’re going to be flung around by newsflow related to the Fed,” said Toshihiko Matsuno, a senior strategist at SMBC Friend Securities Co. in Tokyo. “There’s been a report the Fed is likely to signal it will reduce easing soon. But the Bank of Japan has started its own easing so I don’t think we need to be too worried if global liquidity scales back a little.”
Shippers led gains on the Topix today. Mitsui OSK Lines Ltd., which accounts for 36 percent of the Topix Maritime Transport Index, climbed 6.1 percent to 381 yen after being rated outperform in new coverage by Credit Suisse Group AG. The brokerage cited the sector’s low valuations and recovering dry bulk rates. Mitsui O.S.K. Lines, the world’s largest merchant fleet operator, rose even after one of its ships suffered damage amid bad weather in the Indian Ocean, causing the crew to abandon and some cargo to be lost.
Exporters advanced as the yen held losses against the dollar. A weaker yen boosts overseas earnings at exporters when repatriated. Toyota Motor Corp., which gets 75 percent of its revenue from outside Japan, advanced 1.8 percent to 5,800 yen. Canon Inc., the world’s biggest cameramaker, climbed 0.5 percent to 3,175 yen. Sharp Corp. advanced 1.2 percent to 429 yen.
The yen traded at 94.91 per dollar today, falling for a second day, after strengthening last week and touching 93.98 against the greenback on June 14. The Japanese currency weakened against 15 of its 16 major peers today, after a Bank of Japan report showed its current-account balance will rise to a record amid unprecedented monetary stimulus.
Among other stocks that rose, Kansai Electric Power advanced 6.2 percent to 1,384 yen, the bigget jump on the Nikkei 225. New safety requirements for nuclear plants may be put into effect from July 8, Kyodo news reported, without citing anyone. Kansai Electric said May 28 that they plan to submit an application to restart nuclear reactors as soon as they can after the new guidelines are put into place.
Sony also gained today after Third Point LLC, the hedge fund led by billionaire Daniel Loeb, said it increased its stake in the electronics company. Third Point are pushing for talks with the board on a proposed initial public offering of the company’s entertainment business. Sony advanced 4.4 percent to 2,036 yen, the second-biggest boost to the Topix.
The Topix has dropped about 15 percent from an almost five-year high on May 22. Shares have declined amid a strengthening yen, disappointment about Prime Minister Shinzo Abe’s growth strategy and concern global stimulus will be reduced.
Drugmakers were the biggest drag on the Topix, falling for the first time after posting a 5.8 percent gain in the past two days. Takeda Pharmaceutical Co. and Astellas Pharma Inc., which have a combined weighting of more than 40 percent on the Topix Pharmaceutical Index, each fell more than 1.5 percent.
Shares on the Topix trade at 1.17 times book value, compared with a high of 1.37 in May. The S&P 500 trades at 2.4 times book, while the figure is 1.6 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
The Topix has swung an average of about 3.5 percent daily since May 22. The gauge’s 30-day historic volatility was at 41.49 today, near its highest since the 2011 earthquake and tsunami. The Nikkei Stock Average Volatility Index, which is calculated using options prices, fell 1.9 percent to 38.34, indicating traders expect a swing of about 11 percent for the measure in the next 30 days.
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